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Measuring the Macroeconomic Effects of Reducing Benefit Dependency

Published online by Cambridge University Press:  26 March 2020

Ray Barrell ,
Simon Kirby ,
Rebecca Riley  and
Desirée van Welsum
Ray Barrell*
Affiliation:
National Institute of Economic and Social Research
Simon Kirby*
Affiliation:
National Institute of Economic and Social Research
Rebecca Riley*
Affiliation:
National Institute of Economic and Social Research
Desirée van Welsum
Affiliation:
National Institute of Economic and Social Research
*
e-mail: r.barrell@niesr.ac.uk
e-mail: s.kirby@niesr.ac.uk
e-mail: r.riley@niesr.ac.uk
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Abstract

We construct a framework for evaluating the macroeconomic impact on the UK economy of policies that are aimed at reducing the number of people receiving social security benefits by helping them into employment. By means of model simulation we evaluate the gains to the economy in terms of output, employment and improvements to the public finances of a policy that reduces the number of people claiming disability benefits or lone parents on Income Support by 5 per cent. These gains can be regarded as significant and have to be offset against the costs of the policy. We conclude that it is possible to evaluate the impact of policies to enable benefit claimants to find work using a macroeconomic model, and that such an evaluation should be included in each assessment of policy change.

Type
Articles
Information
National Institute Economic Review , Volume 186 , October 2003 , pp. 85 - 97
Copyright
Copyright © 2003 National Institute of Economic and Social Research

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Footnotes

Desirée van Welsum is currently at the OECD. Her involvement in the paper preceded employment at the OECD and does not necessarily reflect the views and opinions of the OECD or its member countries.

The authors are grateful to Rachel O'Brien, Bill Wells, Nigel Pain, Martin Weale and participants at a Department for Work and Pensions (DWP) seminar in July 2002 for helpful comments. Financial support from the DWP and the ESRC under grant L138250122 is gratefully acknowledged. The paper is based on DWP Social Research Branch in-house report no. 124.

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